It's interesting you say that, as there is a game (demon souls for anyone who's interested) that incorporates that idea; that is, when you die you are a ghost and have to reincarnate yourself back to human form to regain all strength, health etc. It does add a feel of 'realness' to the game, as oppossed to "oh i died, let's reload and pretend it never happened".
I also like the idea of small multiplayer games, and group only missions would be alot of fun. Imagine a ground assault on an enemy fortress, aided by dragon air support. That would make me smile....
